Ford Motor Co. and Mahindra & Mahindra Ltd agreed to explore an alliance to fulfil technological as well as strategic needs to cater to the rapidly changing automobile sphere amid an onslaught of new technologies and mobility concepts. Here is a Mint analysis of potential gains that each company could make in the identified areas:
Globally, Ford is not a leader in emerging concepts such as shared mobility and ride hailing when compared with its rivals such as General Motors Co. (which has invested in Lyft) and Volkswagen AG (which launched a standalone company Moia and invested $300 million in London-based ride-hailing firm Gett). Ford, on its part, has acquired a rather small crowd sourced shuttle service called Chariot in San Francisco and is investing in Motivate, the largest bike share programme in the US. Mahindra’s reach in the sphere is also limited even though it has a strategic partnership with ride-hailing company Ola to finance as many as 40,000 cars. With India being one of the most complex transport markets for future mobility programmes and car pooling being the next big idea in transportation, any breakthrough in the local market will be seen as a global success. Both Ford and Mahindra could look to come up with solutions for India’s difficult to manoeuvre roads and traffic systems.
Connected vehicle projects
Ford is a global leader in connected car programmes. Pioneered by its former chief executive Mark Fields, Ford has technologies such as on-demand autonomous vehicles, cars which connect people with their homes, help them find a nearby restaurant while behind the wheel in an unfamiliar city, or using voice commands to control their favourite mobile app on the go. Mahindra will need such technologies to address its global ambitions.
Electric vehicles are still to hit on a financially successful model anywhere in the world but a strong buzz has been created globally and in India, where Mahindra by virtue of being an early entrant into the segment has cracked the cost models and sells its electric hatchback E20 at Rs5.71 lakh—on a par with similar internal combustion engine cars such as Hyundai i20, Maruti Baleno and Honda Jazz. With India deciding to shift to electric vehicles by 2030, both the companies could work together to make electric vehicles even more desirable for customers.
Ford’s India journey and Mahindra’s passenger vehicle dreams both started from a joint venture between the two companies in 1995 but they soon parted ways. Two decades later, Mahindra has its own portfolio of vehicles—successful in India but a notch below global standards in terms of build and quality. Ford, in the meantime, went through a transformation amid the global financial crisis and revitalised itself financially but has failed to make inroads into the Indian market, which is slated to become third largest by 2020. While Ford will look to make products for India, Mahindra will look to fulfil its global dreams—possibly through sharing product attributes, ride and handling, etc.
Sourcing and commercial efficiencies
Even two decades into the Indian market, Ford’s business in the country is not profitable—a big area of concern for its new management led by CEO Jim Hackett. Sharing of platforms, vendors, cost structures with Mahindra cannot be ruled out in the partnership.
Distribution within India; improving Ford’s reach within India
It is a clear indication of Ford’s desire to use Mahindra’s vast dealer network to enter the tier II and tier III markets.
Global emerging markets; improving Mahindra’s reach outside of India
In return, Mahindra may seek Ford’s help in making inroads into markets such as North America and China, where Ford has a big presence.